Amex Probes Yellowave, Halts Trade of Stock

The American Stock Exchange on Wednesday opened an investigation into Yellowave Corp., a former haircutting chain turned into an Israeli technology incubator, and halted trading of its shares following a report detailing a dispute that has split the company’s board.

“We thought this was the best thing to do in light of the news story and the movement in the company’s stock,” said Bob Rendine, a senior vice president at the American Stock Exchange in New York. “We will let trading resume when we are satisfied with what the folks . . . in [the] compliance [department] are looking at. There is a review going on.”

He declined to say what the exchange officials were investigating. Yellowave officials declined to discuss the exchange’s actions.

Shares of Los Angeles-based Yellowave plunged $1.38, or 17%, to $6.75 in trading Wednesday morning before the exchange took action. That’s down from a high of $24 on July 24.

On Tuesday, The Times reported that Laura Ballegeer, Yellowave’s chief operating officer and a director, had won a preliminary injunction and temporary restraining order against Chief Executive Prosper Abitbol, also a director, and the remaining members of the company’s board, barring their involvement in Yellowave.

U.S. District Judge Ronald Lew in Los Angeles ruled that there was reasonable evidence that Abitbol and his wife, Myriam, and two other Israel-based associates had attempted to drain assets from the company by seeking to transfer $2.7 million to overseas bank accounts.

Abitbol took control of the company last month through a stock swap in which Yellowave acquired four companies that he owned. But according to court records, the Abitbol companies are not registered in Israel as businesses and might not exist. Lew said in his ruling that the merger may have been a fraud. Yellowave has filed a related lawsuit to unwind the deal.

Abitbol, who remains in Israel, has denied the charges.

In arranging the merger, Abitbol told Yellowave executives that Eric Benhamou, a well-respected technology executive who heads both 3Com Corp. and Palm Inc., was a partner in the transaction.

Benhamou, a childhood friend of Abitbol, has since distanced himself from the deal, saying that he had received shares in an Abitbol company for helping his friend write a business plan but that he has not invested money or taken an active role in the Abitbol group.

A court hearing on the injunction is scheduled for Monday.